Archive for December, 2010

We already know that academic economists don’t have any ethics. The question is, will they try to find some anytime soon?

Momentum is building, to judge by an article in today’s New York Times, for economists to discuss ethical guidelines or codes of conduct at the upcoming Allied Social Science Association meetings in Denver. My guess is they’ll succumb to the pressure and adopt something very limited—disclosure of conflicts of interest, say—and leave untouched all the other ways economics, as it is currently conducted, falls afoul of ethical norms and values.

So, they’ll go to the meeting with no ethics and leave it with a little bit of ethics. But academic economics will remain mostly without the kind of ethics George DeMartino and others are calling for.

On one hand, everything is supposed to be universal and transhistorical. Individual preferences, markets, prices, and so on all fall under that category. Then, when it suits them, they turn to cultural relativism.

The latest example is Jagdish Bhagwati, for whom free international trade is always and everywhere the right policy. Cultural differences don’t matter. He is critical of any and all attempts to intervene in or regulate international trade, whether it be a government tariff or an antisweatshop campaign. He opposes all such attempts to disrupt free trade. Then, there’s corruption, which he goes to great lengths to describe as a culturally specific phenomenon: what is regarded as corruption in one cultural context is not in another.

The cost of corruption has been particularly high in India and Indonesia, where policies created monopolies that earned scarcity rents, which were then allocated to officials’ family members.Such “rent-creating” corruption is quite expensive and corrosive of growth. By contrast, in China, the corruption has largely been of the “profit-sharing” variety, whereby family members are given a stake in the enterprise so that their earnings increase as profits increase – a type of corruption that promotes growth.

So, in contrast to his position on free trade, Bhagwati opposes corruption in the Indian and Indonesian contexts but not in China. Which is it then, universalism or cultural relativism?

Now, as readers can probably guess, I tend to favor culturally relative approaches to all economic phenomena. As far as I’m concerned, the specific meaning and effects of scarcity, prices, markets, trade, exploitation, and so on—including corruption—depend on their cultural context. But, as against Bhagwati, I don’t turn to cultural relativism for some things and then turn it off for others.

What then explains Bhagwati’s hypocrisy? Is it that in some cases corruption hinders the development of capitalism, while in others it promotes capitalism development? Is that the universal standard, successful capitalist development, which allows him to see corruption through the lens of cultural relativism?

Only under capitalism are suicides closely related to the purchase of luxury cars.

You have to look to India to see the relationship. There, according to P. Sainath, 17,368 farmers killed themselves over the course of 2009—while, in October, businessmen from Aurangabad in the Marathwada region of the state of Maharashtra bought 150 Mercedes Benz luxury cars. The connection?

The value of the Mercedes deal equals the annual income of tens of thousands of rural Marathwada households. And countless farmers in Maharashtra struggle to get any loans from formal sources of credit. It took roughly a decade and tens of thousands of suicides before Indian farmers got loans at 7 per cent interest — many, in theory only. Prior to 2005, those who got any bank loans at all shelled out between 9 and 12 per cent. Several were forced to take non-agricultural loans at even higher rates of interest. Buy a Mercedes, pay 7 per cent interest. Buy a tractor, pay 12 per cent. The hallowed micro-finance institutions (MFIs) do worse. There, it’s smaller sums at interest rates of between 24 and 36 per cent or higher.

Farming households, starved of credit to purchase agricultural inputs, have had to turn to moneylenders, loan sharks, and other “non-official” sources of credit. And, with crashing commodity prices, and increasing levels of debt they have no hope of repaying, farmers have been committing suicide in record numbers. The total farm suicides since 1997 have now reached over 2 million.

Meanwhile, in November, a new group of 101 businessmen from Aurangabad made the decision to buy BMW cars.

We’re known for a long time that one of the secrets behind Wal-Mart’s low prices is the fact that it pays low wages to its workers. Now, it’s decided to pay its workers even less.

David Macray reports that, beginning in the new year, Wal-Mart will discontinue its $1 dollar an hour bonus pay for Sunday work. Why is it making this move to lower the price of labor power on Sundays?

Surely, it’s not a question of being unable to afford it, because Wal-Mart is rolling in dough. Actually, the answer is fairly obvious: They did it because they could.With no labor union or government agency to stop them, with the country too distracted by its own economic worries and woes to empathize with retail clerks, and with the job market in the sorry shape it’s in, what are these Wal-Mart folks supposed to do—quit their jobs and look for work elsewhere? Taking all of this into account, Wal-Mart saw the move as eminently doable…and did it.

That’s the world in which we now live: those on top do whatever they can to boost profits and to keep a larger share of those profits—by lowering workers’ wages and demanding an extension of tax cuts. Why? Because they can.

The about 470-acre South Works site juts into Lake Michigan and has dazzling views of downtown nine miles to the north. The master plan, by the architecture firm Skidmore, Owings & Merrill, calls for 13,575 market rate and affordable homes to serve 50,000 new residents, 17.5 million square feet of retail and commercial space, a high school and a marina with 1,500 slips, to be built in phases over the next 30 years. The estimated cost is $4 billion.

The plan is to preserve some of the masonry walls along an old boat slip. I wonder if they’ll pay homage to the struggles of the tens of thousands of steelworkers who lived and worked on the site from the mid-nineteenth century (as the North Chicago Rolling Mill) until the U.S. Steel plant officially closed in 1992.